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United Asks Court to End Union Contracts

November 25, 2004

CHICAGO – United Airlines asked a bankruptcy court Wednesday to terminate its union contracts if the carrier can’t get an additional $725 million in cost savings from employees by mid-January.

The nation’s No. 2 airline says it needs the additional labor concessions and the ability to drop traditional pensions to secure financing and get out of bankruptcy. The cuts would come atop the $2.5 billion United employees have already made in annual labor concessions.

In its court filing, the company said it “is committed to attempting to negotiate agreements with its unions on the required savings, but its urgent financial needs compel the company to file this motion in case consensual resolutions cannot be reached.”

The additional labor cuts include $191.1 million for pilots, $137.6 million for flight attendants, $101.2 million for mechanics and airplane cleaners, $2.9 million for flight controllers and $180 million for ticket agents, baggage handlers and other employees who deal with the public.

In its filing, United’s parent UAL Corp. also said it was proposing a one-time 4 percent pay cut for all employees from Jan. 1 until the carrier exits bankruptcy “to help weather the remainder of the bankruptcy.”

A hearing on the motion was scheduled for Jan. 10.

United has already given its pilots’ union a series of proposals for achieving the wage and benefit cuts the carrier says it needs to pull out of bankruptcy – from a straight 18 percent pay cut to smaller cuts and changes in work rules.

The proposal is contained in an analysis by the Air Line Pilots Association negotiating committee The Associated Press obtained Wednesday. United made the suggestions last week.

Pilots’ spokesman Dave Kelly called the proposal “an opener” in negotiations with United.

“Nothing is set. There’s nothing definite,” said Kelly, who would not comment on details of United’s suggestions or the ALPA committee’s analysis of the proposal.

United spokeswoman Jean Medina agreed the proposal is just a start. “We’re very open to sitting down and discussing what options the unions might like to put forth to meet those same savings,” she said.

Medina said Wednesday’s court filing was procedural and the “next step to begin the process.”

The Association of Flight Attendants declined comment on Wednesday’s filing but it has already promised to fight the company “over every dime” of its plan for another round of cutbacks.

According to the pilots’ union negotiating committee’s analysis, United is also proposing that it be allowed to cut pilots’ wages another 4 percent if necessary for a period of six months after the airline emerges from bankruptcy.

The analysis, distributed to all the airline’s 6,400 pilots, indicates that if they accept “all the work rule and benefit erosions” proposed by the airline, their pay would be cut 8 percent. Or, the analysis continued, the union “may remove some of the work rule concessions with the additional pay cuts up to approximately 18 percent.”

Among the proposed work rule changes is increasing the time pilots of the biggest jets fly from 85 hours a month to 95 hours a month, eliminating the premium pilots are paid for flying late at night, and reducing sick leave pay.

United’s proposal, called a term sheet, arrived the same week a federal bankruptcy judge gave the airline more time to negotiate with its unions on labor concessions.

Last week, Judge Eugene Wedoff extended from Dec. 1 until Jan. 31 the deadline for United to file a reorganization plan without risk of a rival plan submitted by outside investors. Wedoff also approved United’s agreement with its lenders to temporarily ease its loan requirements.

United, which already has cut $5 billion from annual expenditures since filing for Chapter 11 bankruptcy in December 2002, has said it needs $2 billion more to emerge from bankruptcy.

Besides the $725 million in pay and benefit reductions, company officials have said they could save $650 million a year by terminating pension plans. An additional $655 million in non-labor cost savings, already identified, would put the company close to the $2 billion mark.

Last year, the pilots’ union announced its members had agreed to reduce their pay by 30 percent and make further cuts through changed work rules.

The 18 percent pay cut proposal comes about a month after pilots at bankrupt US Airways Group Inc. ratified a new labor contract that calls for an 18 percent pay cut on average.




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